What is the Hidden Variable in Gas Pricing Lately?

Comment on the June 9 prediction: Well, that was completely WRONG, as prices shot up to $3.69 before I spotted $2.99 anywhere. I think we got down to $3.06. Yes, that’s quite a range.

Sunday, June 16, 2024, 9 AM: To put it mildly, I was surprised as prices reset to $3.69 on Tuesday, June 11. I saw this number posted at a Speedway in Kent County at 7AM that day and thought someone had made a mistake. No mistake, and everyone appeared to follow suit, except for Costco which held near $3 a gallon, which is a good estimate for the 0-cent margin price. There are a few $3.19’s in Jenison this morning. And, in some places, it is cheaper to buy a gallon of diesel. That is rarely true.

Based on what I monitor when it comes to wholesale prices (e.g. NYMEX), last Tuesday’s hike didn’t make a lot of sense. But, I’ve been saying this for a while in 2024. We have watched Big M, Big Red, and their friends be more aggressive in their retail pricing in that price restorations. Instead of going from “no margin” to “some margin”, we have been experiencing moves from “some margin” to “a lot of margin”. That tells me there is some (new?) hidden variable to tease out of our Gas Game work, and right now I don’t know what that is. Are there some new costs in the system (e.g. transportation of fuel from refineries), some new direction from executive suites to squeeze more profits out of gasoline sales (vs. snacks and drinks), or soemthing else?

We won’t answer that question today, and as far as this coming week, as there is a lot of room between the Grand Rapids average of $3.61 and Costco-like pricing near $3, I think you can be patient to wait for lower prices. -EA

Back on $2.99 Watch

Commment on the May 27 prediction: CORRECT, as prices have drifted lower the last two weeks.

Sunday, June 9, 2024, 4 PM: There was news last week that ConocoPhillips is buying Marathon Oil. Will this affect the Gas Game? Probably not, because Marathon Oil is not the same as Marathon Petroleum, and the latter are the folks who have been in the lead with price resets here in west Michigan. However, we will keep an eye on this merger, as well as the Hess-Chevron merger, as fewer oil companies could lead to higher oil prices which would cascade to higher gas prices.

Short-term, though, we are on $2.99 watch, as wholesale prices have been sinking the past few weeks. Our friends at K&G are leading the way, as usual, posting $3.07 this afternoon at many of their stations in the region. Hey, Allendale, get with the program! $3.59?

Prediction: We’ll see $2.99 posted somewhere in Kent County. After that, the crystal ball is cloudy. -EA

Memorial Day Reflections on Gas Prices

Comment on the May 19th prediction: Absolutely CORRECT, as prices rose to $3.79 the following Tuesday.

Monday, May 27, 2024, 5 PM: On Thursday, with the Memorial Day holiday coming up, I was holding my breath about gas prices, because there was a strange spike in wholesale prices earlier in the week. The spike was due to problems at the refinery in Joliet, Illinois. By Thursday, though, the spike was dissipating, and maybe the pricing masterminds at the retailers started the weekend early.

Our Gas Buddy took a look at average retail prices on Memorial Day the past decade, and curiously, the list doesn’t tell a story of relentlessly rising prices. Instead, we see a wide range, starting with a spiky $4.82 in 2014 (which was the top price for that year), and going as low as $2.31 in 2020 (when the beginning of COVID led to deflation). The 2021-2022 inflation spike is obvious as prices hit $4.93 in 2022 (fueled by the early months of the war in Ukraine), but this year, we’re at $3.55 nationally, which is close to where we are currently in Michigan.

What’s the plan for this week? Oil prices are actually at their lowest since February right now, but that isn’t saying much, because they have been trading in a narrow range. Most likely prices will just drift lower through next weekend. Nevertheless, I had hoped to fill up at Costco this morning, at $3.18 or so. But they are closed for Memorial Day. Good for them. -EA

A Tale of Four Different Gas Price Dynamics

Comment on the May 5 prediction: Kind of WRONG, as a hike back to $3.79 was implemented on May 8, led by our friends the Big M. K&G neighborhoods kept their prices lower.

Sunday, May 19, 2024, 8 AM: We continue with our tale of four different gas price dynamics. We saw a jump to $3.69 in Fort Wayne on May 7th, but those prices are back in the $3.30’s in the stations I watch. Here in west Michigan, as noted in the Comment, prices jumped to $3.79 on May 8th, and there are still a bunch of stations in the $3.60’s. But certain places in west Michigan are a relative gas price paradise, such as $3.25 in Wyoming. And, now that I have started to track Costco, as a check on my 0-cent margin price calculation, I see that so far in May, all they have been doing is holding steady or going lower, down to $3.19 or so.

But, oil prices are starting to rise again after a recent swoon below $80 a barrel, and wholesale gas prices are following. A recent rally in ethanol prices doesn’t help, either. I am expecting a price reset on Monday or Tuesday, back to at least $3.79 in Michigan, but it could be higher than that. The stock price in VLO is often a tell, too. -EA

More Fun to Watch the Competition in Fort Wayne

Sunday, May 5, 2024, 5 PM: The price for a barrel of oil broke below $80 this week, taking pressure off of wholesale gas prices, and slowly but surely, off of retail prices. For instance, in Lowell today, I saw gas for $3.61 a gallon vs. $3.85 on April 24. I expect price moderation to continue this week, and in retail corridors that include a K&G in Kent County, the price is $3.39 a gallon right now.

The beginning of May of even years is when I reset the spreadsheet I use to predict gas prices. I will continue to daily monitor prices on Lake Michigan Drive (on the way to work!) and at a Speedway in Fort Wayne near family members. Following Allendale prices was interesting for a while when the new increased competition was occurring on I-96 north of GVSU, but then they stopped competing. Instead, I am going to keep an eye on the Costco on the east side of Kent County, which I believe is a good proxy for the 0-cent margin price.

As you can see in this screenshot from my 2022-24 spreadsheet, it is more fun to play the Gas Game in Fort Wayne, where price hikes are fewer and they dissipate quicker. The screenshot is typical of what I observe. Arguably, Fort Wayne has a lot of gas stations on the southwest side of Allen County, creating localized gas price skirmishes. We could use more of those here in Michigan. -EA

Another Price Hike? Because we can!

Comment on the April 17 prediction: CORRECT for a week, and then the retailers got bored last Wednesday and hiked to $3.85 (and in some cases, $3.89). A FROWN for not seeing that hike coming.

Sunday, April 28, 2024, 3 PM: Last week was the second time in two months that we saw a price hike that didn’t seem to fit the wholesale data. This time, though, the hike propagated through Michigan quickly. Here in west Michigan, consumers could quietly celebrate certain neighborhoods that only reset to $3.49, thanks to the ongoing competitive pricing from K&G.

For context, let me repeat what I wrote 11 days ago: “Oil prices have been holding constant at about $85 a barrel so far this month, and consequently, wholesale gas prices have also been holding steady near $2.80 a gallon.” Yet, starting at the end of March, we have had three hikes: $3.69, $3.79, and now $3.85/$3.89. There are no refinery issues or new taxes. Just remember that “because we can” isn’t sustainable. -EA

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